Growing interest in US bonds

The world’s largest fund managers are expected to sell up to $100 billion in stocks in the final weeks of 2022. The world’s largest fund managers, who are expected to reorganize their portfolios to have a 60%-40% stock-bond weight in the final weeks of 2022, are expected to sell up to $100 billion in stocks. Last week, the US Federal Reserve raised interest rates by 50 basis points and, although it slowed the pace of tightening, it signaled that interest rates could remain high for a longer period, contrary to Wall Street expectations. While this statement deepened the selling pressure on stocks last week, according to JPMorgan and StoneX, the reorganization of portfolios and strengthening of fixed-income positions by wealth funds, pension funds and investment funds will benefit bonds. In addition, investors see the yields of US bonds traded in the market being below Fed interest rates as an opportunity and evaluate that bond prices are trading at the cheapest level they can be. , After last week’s hike, the Fed’s interest rate rose to 4.25%-4.50%, above the highest US bond yield. The sudden intraday increases in bond yields over the past week were reversed by strong buying. This interest in bonds reflects the market’s view that inflation has probably peaked and will fall sharply, even if the Fed is not ready to come to that conclusion. It also points to the expectation that the four-point hike in the policy rate since March has sown the seeds of a recession that will lead to rate cuts in 2024, if not in 2023. On the other hand, the prospects for US stocks are not very bright for 2023 either. Bill Harnisch of Peconic Partners predicted that the S&P 500 index will be stuck in the 3,500-4,400 range for the next 18-36 months.